Amazon, Flipkart not in violation of competition norms, says CCI

Fair trade watchdog CCI has concluded that the business practices of Flipkart and Amazon are not in violation of competition norms and rejected allegations of abuse of market dominance made by a grouping of online vendors.

Amid concerns expressed in various quarters about alleged unfair business ways in the fast-growing online marketplace, the CCI in its ruling also made it clear that any intervention in the evolving e-commerce marketplace needs to be “carefully crafted” to ensure that innovations are not stifled.

The latest ruling from the Competition Commission of India (CCI) has come on a complaint filed by the All India Online Vendors Association, a grouping of over 2,000 sellers on various e-commerce marketplaces.

The allegations were made against Flipkart India Pvt Ltd, which is into wholesale trading/distribution of books, mobiles, computers and related accessories, and Flipkart Internet Pvt Ltd. The latter is engaged in e-commerce marketplace business under the brand name Flipkart.com, as per details available with the CCI.

To assess the merits of the complaint, CCI considered ‘services provided by online marketplace platforms for selling goods in India’ as the relevant market.

In its order, dated November 6, the watchdog said that looking at the present market construct and structure of online marketplace platforms in India, “it does not appear that any one player in the market is commanding any dominant position at this stage of evolution of market”.

While concluding that there is no violation of Section 4 of the Competition Act, that pertains to abuse of dominant market position, the CCI said that the Flipkart marketplace is required to comply with conditions applicable to entities involved in the business of e-commerce, as set out in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.

“As such, Flipkart Internet is bound by these laws, the compliance of which is ensured by the relevant authorities,” the order said.

Though the complaint was filed against Flipkart entities, the regulator said it deemed it appropriate to hold a preliminary conference with Amazon Seller Services Pvt Ltd, as that is also a key player in the relevant market.

Citing the market construct and the context of examining allegations against Flipkart, the CCI noted that there is also no case of contravention of Section 4 by Amazon as well.

Further, the regulator observed that the marketplace based e-commerce model is still a relatively nascent and evolving model of retail distribution in India.

“Recognising the growth potential as well as the efficiencies and consumer benefits that such markets can provide, the Commission is of the considered opinion that any intervention in such markets needs to be carefully crafted lest it stifles innovation,” the order said.